WHAT'S AHEAD FOR THE WORLD BANK? THE BIG PICTURE

An Interview with David C. Korten.

By Robert Wright.

David Korten is one of the NGO world's toughest critics of official
development assistance. His systemic critique comes from more than 30 years of
experience working for the US. Agency for International Development (USAID), the
Ford Foundation, the World Bank and others. The upshot-from that work: a
conclusion that the official foreign aid system is based an the wrong premises,
most of what it does is inherently damaging and most of its institutions are not
worth fixing.

Korten believes that, on, balance, the aid-system contributes to increasing
social. inequalities in low-income countries and hinders their progress at
achieving economic justice and sustainability. In his view, no institution more
fully embodies the dysfunctions of the official aid system than the World Bank.
He believes that attempts to reform the Bank are misplaced, and that the focus
should be on dismantling it as part of the process of lifting the international
debt burden of low-income countries. Today Korten leads the People-Centered
Development Forum, an all-volunteer international network engaged in creating
and actualizing an alternative vision of development through citizen action.

Q: David, do you see any way at all of changing the World Bank in order to
make it have a more positive impact on sustainable development in the coming
years?

A: No I see no meaningful way to reform the World Bank. The appropriate action
is to close it. Those who seek to reform the Bank miss the basic point that
there really is no constructive role in the creation of just and sustainable
societies for an organization that by its basic nature is in the business of
getting low-income countries ever more deeply into international. debt. You
could staff every position in the Bank with people who are totally committed to
social justice and environmental. sustainability and it would only make a
marginal difference so long as the Bank's primary function is to put out new
international loans faster than the old ones are being repaid. To make real
difference. Bank staff would need to permanently eliminate the long-term
international debts of low income countries and dismantle their own institution
and the other multilateral development banks that continuously compound the debt
problem.

Q: Why do you feel this way?

A: I came to this position from very conservative origins. I have an M.B.A. and
Ph.D. in business from Stanford and was on the, faculty of Harvard Business
School for several year. My main interest there was in organizations as
behavioral systems.. While working with the Ford Foundation, I was involved in
developing powerful approaches of proven effectiveness by which grant making
foundations can help large, dependency creating government development
bureaucracies transform them. selves. We proved that the can be turned into
national support systems that strengthen local control and management, in just
and sustainable ways, of local productive resources such as forests and
irrigation. I subsequently spent eight years with USAID in an effort to apply
these methods within its missions in Asia. Unfortunately, we. were ultimately
forced to conclude that the large official donor bureaucracies are by their
nature inherently unable to perform this kind of institutional change catalytic
role. The Ford Foundation was successful because it could make small, flexible
grants in the range of. $5,000 to $200,000, whereas a lot of World Bank loans
are $200 million. $300 million or more.

Q: Would you say, then, that the whole premise of the aid system is wrong?

A: Definitely. The official a id system is based. on the premise that,
transferring large amount of foreign exchange to low income countries is the key
to their development. Foreign exchange transfers simply allow countries to buy
more things from abroad than they could do solely with their export earnings.
Rather than building self-reliance, this builds dependence on the global
external economy. If the assistance is loan-funded, the country is forced to
orient its national economy to foreign needs to repay the loan. This enriches, a
small local elite, the transnational corporations and the financial institutions
that are the major players in the global economy; but experience demonstrates it
generally does great violence to the poor and the environment.

Q: So what kind of work, have you been since you started to feel this way?

A: I don't spend much time trying to close the World Bank. Though I think that
would be a' very positive step, the Bank is only one of a number of dangerously
dysfunctional institutions. Most of my time is devoted to broadening public
awareness that the dominant neoliberal economic model of economic growth, free
markets and free trade is the cause of, not the solution to, the problems of
deepening poverty, environmental destruction and social disintegration. Of
course the failed Marxist model is not an answer either. Thousands of groups
around the world are working to develop new alternatives.

Many of us who are rethinking development from the perspective of equity and
sustainability believe we need to concentrate on localizing economic power and
increasing self-reliance in meeting local needs within the limits of ecosystem
capacities. We further believe that those of us in high-income countries can
best help those in low-income countries by changing our unsustainable ways of
living so we no longer depend on expropriating the resources and productive
output of low-income countries to maintain our own profligacy. We have to face
up to the fact that in the aggregate we are already placing greater demands on.
the planet's ecosystem capacity than can be sustained.

Q: It sounds like you are rejecting the whole idea of development?

A: In terms of the way we have come to think of development, that is correct. We
have no choice but to rethink our approach to dealing with poverty and
environmental issues. The term "development" conveys the idea that the
people who consume the most are the most developed. Thus some of us feel more
comfortable talking about creating just and sustainable societies. These issues
are examined. in depth in my new book, When Corporations Rule the World, which
will be released in September 1995.

Q: Do you believe there are any official development assistance donors worth
working with?

A: Certainly not the multilateral lending institutions. The best you can say
about most of the official bilateral agencies is that they do less damage. The
best results among official agencies come from the public development
foundations. The better ones have demonstrated the ability to function as social
change catalysts, which means working from a very different premise than that of
agencies built around the idea that development is about money.

Q: Can you cite examples?

A: Oh yes. The-Inter-American Foundation in Washington, D.C., has done some
excellent work, as has the Asia Foundation in San Francisco. Appropriate
Technology International in Washington has an especially well developed and
effective strategic perspective and is doing phenomenal things with its limited.
funding. All three of these agencies make strategic use of small grants to
catalyze significant social and institutional changes.

Q: Wouldn't poverty be worse in developing countries without our history of
foreign assistance?

A: Obviously it is an impossible question to answer with any certainty. I
believe a case can be made that without official aid low-income countries would
have far fewer people living under conditions of dehumanizing deprivation,
because the control of real resources like the land and water on which people
depend for their livelihoods would in many instances be. more equitably
distributed. Bear in mind also that a major part of official aid has been
military assistance to support corrupt regimes.

Q: Why exactly do you see the World Bank as such an impediment to
sustainable development?

A: First, it is committed to a flawed development model that is inherently
unsustainable. Second, it is far too big and bureaucratic to work in the
catalytic change mode appropriate to the task of creating just and sustainable
societies. Third, it is a bank in the primary business of making foreign
currency loans to low-income countries. Increasing international indebtedness is
not a path of sustainability.

Q: If the Bank were to change direction and become a positive force, what
fundamental changes would it have to make?

A: For starters, it would have to become a "non-bank" that works to
reduce, not increase, international indebtedness.

Q: Why do you think that is impossible?

A: Perhaps not impossible, but highly improbable. Say we were to decide we need
a number of small multilateral development foundations committed to facilitating
the creation of just and sustainable societies through catalytic interventions.
It would be easier and probably more fruitful to create such institutions anew
rather than attempt to transform the World Bank into the antithesis of what it
is now.